Someone is asking me a question on lending money to a minor to purchase cattle. We have to have an adult (parent) co-sign, but the parents bank somewhere else for their farm operating. When we file the UCC, do we have to have the parent's name on the UCC-1? If we do, when the parents sell their cattle or farm assets, they will have 2 different bank liens on their check proceeds.

Lending to a minor in any capacity is totally going to be dependant on State law.

What state are you referencing? The age of majority is not the same in all states.

If a person is a minor, they can borrow money and pledge assets. They can also disavow (walk away from) most any debt (with a few limited exceptions). Not good if you’re the lender.

Who really owns or has rights in the livestock? That is the name you want to show on a UCC1 as the debtor.

This is for North Dakota. The minor is looking to purchase cattle, I'm sure they'll be in his name.

We see this in a couple of our branches in smaller rural towns. It can be FFA kids borrowing money to buy their show cattle for the coming year or parents assisting kids in purchasing breeding cattle or running stockers.

Our lenders are basically working with the parents to allow the minor to borrow money as a teaching tool. Depending on the size/underwriting of the transaction sometimes there will be a requirement for the co-signer to pledge collateral.

I believe that your question at this point needs to be directed to your lender. Is he comfortable with the parents just as co-signers on the note or is it his intention to have them also pledge assets to the loan?

In North Dakota does the filing of a UCC affect the names on the checks? Or is it only if you notify the "buyers" of cattle and/or crops that can get a Bank's name on a check?

In North Dakota they file a UCC-1/CNS-1 for their notification system.

The North Dakota Century Code sets the age of majority as 18 years. [14-10-01]

So does that mean the livestock that we take, if we file a UCC-1/CNS-1 only on the minor, is considered pledged and they can walk away from it? Does it make any difference if we have the parent on the loan and not the filing with the parents name?

The parents can't walk away from the debt. Make the loan to the minor put have the parents as co-makers or guarantors. It is good for the parents to teach the minor responsibility but you do not want to be left with no one obligated to pay if the minor does not pony up.